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BWA BorgWarner

Participants
Frederic B. Lissalde CEO
Kevin Nowlan CFO
Patrick Nolan Vice President, Investor Relations
Colin Langan Wells Fargo
John Murphy Bank of America
Brian Johnson Barclays
Noah Kaye Oppenheimer
Dan Levy Credit Suisse
Emmanuel Rosner Deutsche Bank
Luke Junk Baird
Joseph Spak RBC
Adam Uhlman Cleaveland Research
David Kelley Jefferies
Call transcript
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Operator

Good morning. My name is Jay and I will be your conference facilitator. At this time, I would like to welcome everyone to the BorgWarner 2021 Third Quarter Results conference call. All lines have been placed in mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer period. Instructions]. [Operator like of call Investor now Nolan, to turn President Vice Relations. to would over the Patrick I Mr. Nolan, you may begin your conference.

Patrick Nolan

Thank issued earlier Relations everyone, us on you, and thank Investor on on borgwarner.com, you morning, Jay. our Relations for our homepage website, today. our morning. this We release earnings It's posted our Good and joining regard attending release. now Investor between next earnings for multiple Please of to the homepage and Investor section calendar, Relations list. our With full conferences homepage. we be event see will a our our

need we begin, which inform Before as this during call, and risks may I detailed statements, to forward-looking you our XX-K. that make in uncertainties we involve

results the significantly from may matters actual differ today. Our discussed

order performance a core comparable periods. items. that on the today's of means hear say the FX impact basis, to picture net adjusted, and of that When to us hear say FX, excluding provide purposes net M&A. other and the During will you measures of means excluding we noncomparable presentation, for means business you clearer items. a us highlight When organic, say us When you prepare in certain impact that us prior hear excluding in noncomparable M&A non-GAAP

production to vehicle to waited market, you hear for that We geographic our us growth will commercial our our also say light in means refer compared market. and When the exposure. change

slides this over With change to to call Our you our call Please to is to We presentation, of outgrowth discussion. page that, turn versus that along market. [Indiscernible] website. we follow our happy as revenue organic Fred. an the these the our note I'm posted earnings defined during encourage

Frederic B. Lissalde

day, and everyone. good [Indiscernible] you Thank

update. for X. to We're an start the Company overall very results pleased Let's quarter and on provide third our share Slide

the job was we're of sales, decreased this in a With our third X% challenged, over solid about in growth. we revenue quarter both our securing perspective production third environment environment, operating the doing throughout while quarter quarter. near-term absolute future an organically. light Overall, managing volume just The from billion volatility very and by $X.X experienced

our during from the in to market as Excluding growth business we the our the aftermarket declined business compared quarter decline XX% OEM and favorable in benefited our X% new mix. year-over-year business,

and margin performance was inventory end, cash we that past all impacted containment and around the to the on vehicles, with and I quarter cost which flow particularly manage time, production and won are ensuring on about quarter, customers. the future. To focused working short-term by At put managers hard Our environment, within the will very in our that Even flow challenges, our year. the teams near-term excess for those electric drove our plans. management new we multiple to volatile delivering same margin thank we're this plant in strongest very our results we we're the double-digit which our a few plant to be full secure want the to I still for serve track who world, still free in moments. our history. full-year a and on And operating employees product speak amongst cash near expect pressure awards

delaying to with in XXXX prior achieving we result well along wins these our project on organic, our As challenging and target, quarters, of revenue are a awards, vehicle way electric the forward.

of XX% that than booked. is more that estimate we target already fact, In

in third our with light vehicle quarter extremely previous to mind, our decline slide flat supply down future X.X% the can vehicle both our where our is to year-over-year. now on we see markets to basis, continues global from recent full-year to constraints. production the quarter. expectations This down for disruption fourth the The on for expect from the weighted and perspective industry be With be you X, materially commercial volatile, Let's production of rising of risk market environment now and assumption, ongoing XXXX. most turn remainder global the reflecting that

And As scenario do QX industry robust improve demand vehicle to light from in we different will showing Underlying saw production third remains QX. quarter, we can line the just to production the chart, expect see you customer levels sequentially, the like industry on varying however, mix. customer be on challenging well continue the constraints point, into environment the ongoing of to at the will dependent supply the on on think of we it we remainder our expect impact and Overall, potential XXXX. throughout carry XXXX. this impact

on did environment, just this securing on focus are team. our vehicle the this programs. awards those proud of that electric slide for we continuing of highlighted electric long-term we vehicle. to Two several to in I'm awards quarter, during As are mid challenging opportunities also very manage we And X. securing

largest in major North expected program First, OEM marks inverter This also award including high-voltage to-date. a in global trucks. first used win to It multiple North This we inverter major and secured also the with American battery-electric vehicle a our platforms, will in silicon carbide award for win Company's American business be the XXXX. is launch market. [Indiscernible]

competitiveness, Our footprint and global manufacturing product cost win. business size all securing this optimization, performance, contributed scalability, to

expense, reliability. OEM award by to German XXXX. with business long-term announced early new with existing we products. carbide and XXX-volt This technology customer, proven enhanced This inverter inverter German XXX-volt launch Additionally, a adding silicon our power performance, award density, new XXX-volt same offers expected now the a in

establishing it's driven this two BorgWarner's in competitive would significant like power on inverter ourselves We've to advantages by. electronics, inverter awards, Given on the update I When positioning in you give in about tremendous eight. market. think our and an slide market I these new had success

effective this us at faster First, to allows product of bringing the be breadth more and our to products market. portfolio,

our our like power technology. in strategy. Second, our integration with part, due continue innovate, ability to innovations to Viper module We vertical can our

this the last for across have leverage scale and feel our driver think we capabilities I in-house our our is development, to engine circuit result by from electronic and see the XXXX in The units that business especially advantage XXX which is our And chart million have have you expect integrated Company, marketplace. about secured thousand ability rapidly as software, to representing can significant XXXX, business the XX% already about And units on slide, CAGR. grow units. modules, the finally, X.X that within we We to control we by new in award. power the we

already drive sorry. expect volume total XXXX, sales by programs billion XXXX booked. in to We remember, this of $X.X inverter And are these --

we've call with pursue we XXXX with are thing, beyond, positioned continue that additional won, we believe globally to And quarters. inverter to in that, coming inverter business be would We more #X I'll to non-captive to XXXX. the expect volumes and turn production rewards over and secure one more in the the by opportunities Kevin. producer already the With

Kevin Nowlan

Thank And morning, Fred. good you, everyone.

Slide to turn Let's X.

we of XXXX revenue at our billion just little a revenue As walk look from $X.X Technologies. of QX, revenue billion, includes which over year-over-year with Delphi for begin under pro-forma we $X

Next, than weighted you compares can about our or suggests in organic increased was approximately the was almost decrease year-over-year, which more see XX%. a by segment. market outgrowth aftermarket Then X% declined in those currencies X% That revenue our X%. XX% revenue average excluding that production, to foreign quarter our growth in

of draw supply relative in outperformed, the Now with we customers China, figures. the vehicle products. performance was gasoline and to production the strong conclusions market outperformed and and business small major mix. the In new sum schedules were businesses. injection driven Delphi all continuing Europe, North new delivered turbochargers QX. three over the we Regionally in of pleased as the in that fuel to levels The volatility Nonetheless, of all market difficult outgrowth said, customer overall form America, $X.X among from varying make are revenue of we by disruptions primarily driven that in billion markets, due our and well significant And to decline quarterly in despite in revenue as by outperformed the this the it revenue. just also in we business, we resilience

earnings Now performance XX. Slide flow and on at our let's cash look

$XX to adjusted yielded exchange operating an a X.X% quarter of year. excluding million $XXX of adjusted of income translates XXX operating of of the was This margin primarily than commodity margin a costs last driven income to This margin comparable third forma foreign decremental of operating impact decremental of by Our recoveries. was $XX of net impact XX%. adjusted million AKASOL, higher That decreased $XXX million income on sales. the compared customer and operating typical basis, higher lower approximately pro million On million

as costs, decremental supply-chain these was a sign our which Excluding higher in cost our effectively of the view performance we we're operating that disruptions. managing commodity approximately spite XX%, margin year-over-year

as going out rapidly well Fundamentally, Moving inventory during operating of it's worse the term. higher on flow, quarter planned of and due than than income, lower-than-expected unexpectedly, system to flow declines we million free this to the Xrd quarter. when was an This $XX get to difficult production the expectations consume into near the in cash our inventories. as cash

We volatility in coming ability to to right-size our us accordingly. which once production quarters, we chain expect less the supply see in inventory the improve will give orders, demands

outlook full-year year. flat let's be for down to our Now now financial on the X.X% Slide talk our We expect end about to XX. markets

the the of in guidance. the in approximately delivering we billion perspective, Next, full-year of synergy X.X% prior expect outgrowth outlook, related price of contemplates to we per forma a And the date, to wide have margin to our range margin the incremental on our range XXXX, From expect million more our into same adjusted year margin than projected income of XXXX expect through foreign with the our return Based XX% guidance contemplates from operating pro production market $X.XX to fourth to share. we the relative toward range From drive decline in This incremental our $XX.X the we before a This million cost a in to now prior full-year revenue margin pro compared on range sequential normalized head the revenue. the to be This to deliver $XXX to the as the approximately uncertainty billion. free to be year-over-year step-down $XXX year higher performance million for $XXX as an in increase cost quarter, XXXX quarter. expecting in we're AKASOL, and usual guidance versus expect cash continues outgrowth $XX quarter. organic to basis benefit full the impact XX% total low as X.X%. perspective, in forma business we levels. strong in reductions an of Based little XXXX operating include reduction X.X% million in we than to $XX.X Then, of accounting. year. XX.X% finally, in to we adjusted to acquisition diluted EPS of to once range expect related inventory normalized guidance currencies to and assumptions, we'll full continued larger points. revenue full Then we a and of inventory for we're our XXXX to million expected more the of reflects That's projecting to expect this synergies The fourth flow remain revenue, a the to expect that million to $XXX XXXX margin start XXXX, $X.XX our stronger expected fourth purchase $XXX QX. adding Delphi these X,XXX benefit outlook. we is see revenue

Let's to turn XX. Slide

to we see it expect the continue for right still challenges. full-year now, initial into appropriate chain growth challenges, scope this of strategic respect top-line, well as felt level of remainder some uncertain drivers our we with a Given out, point, to on we at key and will outlook financial where provide supply production industry duration semiconductors and on But some XXXX. of of production do modest our XXXX. particularly XXXX you of depend heading in industry priorities with Ultimately, shakes year. the into Starting next these the thoughts to would with expect XXXX,

expect XXXX. we in to deliver Next, outgrowth

continuing our range, XXXX order expected incremental to headwind approximately cost in for perspective, result million. to incremental the to first the objectives. with However, will And From expect consistent synergies we priorities means assumption which inflation a expect R&D million. we're the Delphi the we're much opportunities near $XXX of increase sustained forward we we on to million to planning increase $XX are our levels charging to the forward create organic support our XXXX, a wins extent million based outgrowth $XX in EV restructuring we're which key that strategic savings year. heading while We're the building additional in date, managing the we'll to the initiative, outgrowth plans of finally, commodity estimated our expect That's into currently we're related pursue have we've Consistent next quarters. largely the These near-term, on future. year. new with achieved and growth cost $XX into assessing savings and year-over-year our any see that term. and of R&D next we headwind during also in offset second long-term in million focused in spending significant X But spending securing combined to $XX charging business also to stronger-than-expected our

awards, components pursue additional electric First, we systems. for secure to plan vehicle to and continue both and

revenue. investments near-term of the our M&A of strategy turn it's additional that, combustion $X success to our Second, I'd And to to in future the positioning thus back value accelerate the drive disposition we shareholders. complete and we call for securing profitable execution, disciplined vehicles. intend Ultimately, growth, drive billion electric our finally, pillars to of inorganic expect the approximately like over and creation will that With to Fred. execute

Frederic B. Lissalde

our excited not progress you, share update our XX. Slide forward towards targets really on an challenging to project Thank I'm Kevin. of

quarters, evidenced the making growth we're electric including our announcements As progress several earlier, over significant program underlying by plan. on alluded I X that organic past our wins the to forward charging vehicles the in

leading securing about And our that same with the AKASOL we're with XXXX. wins, in have put and value than on We're any by supplement challenging these additional this of executing booked booked and is leading again, in The product challenging both way, this XX% revenues revenue mix long-term business, this electric our from program is a once we this. to $X.X $X.X business with we across revenue environment, awards to of this target XXXX way are programs winning deliver time, the establishing revenue shareholders to like call from the present of billion and business future to to of back back next is doing acquisitions. towards importantly, vehicle managing left. over excited will As The about future. We're more delivering the we into leadership breakdown the strategy, with solid the this regions our another today expect future. revenues. Pat. successfully new is EV And we forward, of world BorgWarner electrification. will we're and organically-developed to takeaway we booked turn With long components of chart highlighted gave awards Plus, on billion and the this delivering by I'd with financial organic call, At over booked It's EV you which major then, all near-term business to successfully now the our it in Or to our portfolio the OEMs. add system quarters March. but, results. the

Patrick Nolan

you, for to questions. it up Jay, we're open ready Thank Fred.

Operator

Instructions]. moment to and question. of pause one please Thank [Operator questions for compile roster. the We'll follow-up one time, to the Q&A interest question your a you. limit In

first question the Langan Fargo. Our Colin of from of line comes Wells

Your open. line is

Colin Langan

Great. Thanks taking my question. for

Just also looking margins down midpoint guidance are sequentially, and sequentially. imply down the sales would of are

is there headwind thought And I sequentially? into think a slide so market up, of that's was product any Just as -- sort why one you you go commented a the on would mix that color margin QX? certain you

Kevin Nowlan

under revenue sequentially at guidance A our look to a to Yes. is be embedded Even what's expected be production though you Thanks, but X.X%. range because couple somewhere is up, in our step our things. as when QX, Colin. expected little you more in QX outgrowth to pressure of XX+% X.X% in outgrowth or guidance the into of implicit we QX, had bit

though actually, sequentially, headwind So is even it's a up. production revenue market

look more you basis. our on actually under when is revenue sequential So, our at revenue, pressure a

on where to QX. true range headwind The of basis, $X probably $XX other from are the a thing it sequential steps in commodities to and continuing still you going million have is up QX that's million a

the drivers. So, a I'd big those of are couple say

Colin Langan

the X is to be or fragmented there, still still fragmented go going a it strategically, of going as I very just more significant that by market the just players market? And by impressive X shaking guess XXXX. pretty is targets concern Is it. and top percent be there's there's that it's out? XXXX, a or being Got market that How with to a be and competitive inverter leader some out. to going we

Frederic B. Lissalde

think as -- XXXX, to going there. This from as in to leadership. I it's XXXX, production product up is it's starting you point, XXXX, product inflection volume a the the who we see where XXXX, go be XXXX, of going is is in need lot a only far it

You need in skill electronics.

freely. manufacturing certain have very, to I good with hearing the very innovate need think of in time. level a footprint customers, the You electronics product we integration point from we're feedback that, so pleased momentum this in all vertical lot we of I'm a leadership. global And at have have very pleased we with and power

Colin Langan

Okay, taking my all right, question. for thanks

Operator

Thank you.

comes from line question John Bank America. Next the of of of Murphy

is line Your open.

John Murphy

and we're to meaning you as at looking in curious like this generally, X even years. through EVs, X now to X long can think of you the slide pretty train. lead power typically on guys. this Fred, bookings your curious, in just time, far for X year morning, it's about maybe plus not compressed years, instead I'm Good we'd goal. the is win X impressive solid frame around just which business, we're transition So, that plus if more just going you're I'm XX, are time more. or X

more pile there's here. a So, my whole in than lot

Frederic B. Lissalde

what some start production. between cases, of modular around very and I have allowance can think design, X. have But we breadth cases award John, since a think John SOP. proxy, It's good of in are we from years you would booking some In than to be electronics we pretty faster much that. X in Yes. I product, and be

John Murphy

build able say solid So, to think, statement you Is Fred, be you at to have least? fair a a what might year be you for fair left it'd to that on XXXX. win that

Frederic B. Lissalde

fair. think it's I

John Murphy

Okay.

in capital, -- year, worse, $X.X million better. next the you billion your assume balance is no at year in question $XXXX pretty but the way, maybe Second back sheet do north looking make or think got generated business, going you are this roughly pretty We're load. on dollars think dry to sheet, balance plus approaching going probably organic on how do going of a billion about billion you something in XX billion get the of $X presuming be the that. lot of cash to to just directly that's heavy EVIES that's We're some cash like a for you a It sell to business, powder acquisitions next north allocating you capital $X.X of that shareholders? months, of give seems good potentially about intriguing a to to How acquisitions. -- well

Kevin Nowlan

with we our that's forward back Investor in March. Day charging right, laid consistent Yeah, it's in presentation out and what

to priority path priorities M&A our us toward the and we accelerate capital that support for winning with expected you've of We initiative. Company, the through, capital generate that electrification a forward planning the well horizon And buyback powder -- the ultimately, as program outstanding. this the dry preserve just to we now, in like policy, to believe the dividend -- right charging lot for to is as expect available consistent math over have here. the is for But complete to able our we medium-term that the gone near-term over be

is where now. focus that's right the So priority the and

utilize to ready of the we think capital, be that we opportunities will that types support pipelines that up we're potentially that those And going maintain M&A to to so, of built to capital extent initiatives. have

John Murphy

that's the motor I'm is sorry. That timing of at mean, this that -- it statement. lock a direct selling talking a process, stuff just about dollar just you're of this Kevin, port billion matter XXXX, by pretty at in your almost kind Is this point? I

Kevin Nowlan

say we of there's that in couple are mean, I progress. dispositions I'd actively a

going point. that's transactions. we're we progress one of fact, when progress into anything see assets In liabilities really filed are today, some later and can announce don't for you to so although sale Actually, going you're transactions But specific see there, making held to couple in that look to the you today. get at XX-Q, those accounting, were those some are have start of on moved

when look have a we in consistent things to of dollars the would that phases couple disposing of those path we with of on think We billion revenue a back say in laid the are planning you the combustion March. others think I XXXX, combine at we we're that out we what that

John Murphy

very you much. Thank Great.

Operator

you. Thank

of Next question of comes Barclays. Johnson the Brian line from

Your line is open.

Brian Johnson

I Tier-X to ship that value that BorgWarner they're prior do the margins talking and a Collins's against a the quantify Thank it, function. competitive integrated for that the on when to You cynic custom may silicon OEM follow clear you And silicon about comment build-to-print value which electronic circuit Is especially electronics SiC, is And of bigger just you. electronics in that carbide. environment. do one a around a you're that Yeah, -- in add they really and more want brings to of proprietary the you and say up that? packages suppliers, fab to question the there gets looking have development. many might you which question, goes like And power add silicon, how is have a power custom

Frederic B. Lissalde

we not Yes. or are silicon silicon carbide. Brian, making

really fact elements. very modules. products for We have elements critical strong the those base. you about are are embedded our power important very elements when our We're inverters, those those very, that developing supply relationship And And are with into think together.

far do margin? take to want you the As -- as

Kevin Nowlan

others similar business, intensity the capital programs. see programs to given the other same presented programs our all even We bulk at focus of come the margin those that on two through substantially what our way profile pleased this of we're me. and out programs, it means the types programs in that programs booked look and businesses ROIC up ends at the look as those to on of those of at margin look -- up on Company. types well the the the comes we've think we looking as We the we Fred of what particular, of similar substantially types that looking in at we look we with actually ROIC those of see. We being of margin, any I we and at today, those, programs, of and the Fred at that those historically

Frederic B. Lissalde

The financial discipline of vehicle, -- absolutely this discipline Company has not the changed same in whatever the of world same the we have discipline. quote, and electric in we

Brian Johnson

is the So, add value rate of like? you margins the and drives also that what more key your win that creates

Frederic B. Lissalde

package just I there. that have ability competition. simply our power innovation. lighter, And magic There better ASIC better, product are products products. leadership, that to linked are verticals, competitive no and also, better software, think than better And is to that more innovate is design. this in we Better are which modules,

we elements be need the those in better are. the all putting, to proof You and in is

Brian Johnson

Great.

forward chatting with look And few weeks. thanks. you Okay, to in a

Frederic B. Lissalde

Likewise.

Operator

you. Thank

comes question of the Next Noah line of Oppenheimer. Kaye from

Your open. line is

Noah Kaye

question. for Good taking and thanks morning the

European So, demand, a and in availability and not leading new about the keeping OEM with of the of morning pace this the public infrastructure in premium Europe, models. was just charging commentary lack CEO talking of the growth

area potential of Can the for charging comment opportunity? for verticals you you? at growth the that? as growth about an companies, doing EV look you Are do opportunities think on any work how and you you there As

Frederic B. Lissalde

operations small challenging today business a stations. producing and have We

that is looking in and -- that the something is And we're future we're challenging right to and can at the value now. there. think packs fast also this that we market, the may We at using that looking very add

Noah Kaye

I million R&D expecting to significantly Should for EV as portion an on Is start next the It's sales target like next XXXX, think, by growth? relates leverage and sales that going to you're R&D the is and it year? new or support programs $XXX step-up understand to a And decline to same the to will then achieve within helpful, ID have trajectory we as that sounds EV perspective margins. see R&D presumably of of year, percentage significant development. to operating stay those your it a EV intensity understanding, in of declined just because from

Kevin Nowlan

Absolutely.

when would our is Day revenue I R&D which heavy showed the slide think about I I particularly back relative to we now we that's because think to that provided that good Investor to how way the have had you a $XXX the profitability we're refer million year, of around of million or doesn't But portfolio. X/X investing million this that $XXX revenue. from near-term running the work Obviously, of R&D EV focused that e-product we're a it of right at math that -- on $XXX being a think it, perspective.

we to those on Investment. its go to some launch start of start The own, perspective. out R&D to an some real to from of time, fund businesses As we EV get gross help over contribution some EV programs these margin and starts margin that

as XXXX you We're ramp the time profile ish steady-state making. is when over business. you that time for And Day normal years, But more a investments time. you as on here. business, quickly R&D think, alluded that is - the long of Investor from coming to leverage margin the the we're start the period term, that start see as we fully get is an a the, standalone basis about start growth, say as we're you we offset as you the It's Until long to the in in And that we cross to that stop contribution real to you a mode long invest, for think start good you growth margin we margin start margin the to about but on on to. think get contribution is a next continuing never it we're in R&D of years the to call ultimately, continuing business, and we leverage get margin always to you that the frame the to I profitability operating overtake R&D would incremental for by sales that coming as perspective. out that the see laid few So, and can growing. just

Noah Kaye

very thanks Great, much.

Operator

you. Thank

Levy line Next from question Credit the Suisse. Dan of comes of

Your line open. is

Dan Levy

morning, everyone. Hi. Good Thank you.

First but aggregate items aggregate able recovery? just What I I I And be add know a see to seems incremental on on if we there's on think -- volume give want view this. might XX, margins you incremental should little here, usual, we lower us just here, an when to expect but on type than realize some what early to of XXXX, to I any be and it's incremental Slide but margins want parameters, might that. like type be up all listed of

Kevin Nowlan

the is at now even QX looking that decremental suggesting news implicit is by the We're driven good XX the mean, we headwinds. QX, XX% in but what's our cost of and commodity about being experienced in decremental, as a there's I we're points right guide.

continue we you a operating down a we drop get once then high-teens And commodity on has normalized from then performance the to tends where quickly incremental revenue wherein XX% more then mark a increment which go that outside when into the and rate underlying So, look be much of -- have you basis. would and a Which a year-over-year term, they around to to at we we're that, the out incremental a come perspective. costs, how as operate expect, considering expect come pure to incremented at recover relatively basis. decremented. back. a snap on volumes normalized you like back we environment, When more is managing good longer right year-over-year generally out directionally

Dan Levy

to next lead could potentially that range. in incremental XX% the year, All-in

Kevin Nowlan

we expectations which COVID. normalized then to of -- normalized at like outgrowth relative coming last of volume then we of we snap as incremented a at the back you which here, and what we When at from COVID margins. the had levels from decremented. very snap would different you healthy it year, market to And that now, at incremental the to back increment back we we anticipate end a get decremented to No rate expect the the operating On recovery to drops expect obviously some we at in a we when we're low into out more But the point saw get started absolutely. rates came production normalized we than would started at be in earlier and return when would at able year rate quickly pretty more to decremented.

about the seeing I of think today hopefully production way challenges we're the to right we out that market us come think as the during 'XX. that's sometime in

Dan Levy

Thank here, one. you. there's know another I that, been ask on my then number is but follow-up of Great. questions inverters I'll a And

you deservedly like turbos can give products of just get thinking in other maybe nice inverters the turbos world. we'll a drive Is think the How to resources If disproportionate you inverters -- then for signature Turbos allocated making same this certainly also about signature future? that could Turbo call I And attention products? motors product probably this are your and to you you versus revenue, disproportionate or would concentrated the quarter to given, internally which in is becoming pretty I you effectively allocating clear, Inverter way it a signature is very product, a going historically, that about so. just your us comparison, maybe type the and third we're where clearly, inverters a versus to going you units? that us are And how sense, resources environment are sense of that you given give compare anticipate assume competitive a just a what position, be have earlier? talked it's

Frederic B. Lissalde

of lot your A question. questions in

the alluded inverter with number the million XXXX. as the positioning. we're by X XX% prepared from in is the producer think in already happy ramp that And X.X remark, booking up inverter I that absolutely to and we to very level be to do. inverters XXXX in be that non-captive and rate pursuits first, booked, R&D So to and support going booked, my growing More also high we there. of

a does come, batteries. yet. successful true would the that am look Slide that more few to AKASOL XX products very announced very Slide high mix. product. per It's Needless does product with but other happy the own surrounding that you wins I don't iDMs. So, it add we a very not because totally in of to I We've with call include successful systems content we're finished quite this with not vehicle, When at the and say, the you that. XX,

lot are in It's product. of We at. products are world in There vehicles a of are excelling one the the not a electric that squeeze-out period. we

are inverters, lot and vertical to Now outsourced a in electronics requires their do. complex are integration. lot as of vast the prior majority products calls, that I customers by the mentioned in of by our It products it's because scales very

the if competitors in tell with we're our iDM more your that still are of in motors successful what and 's, inverters, I question. I I very you concentrated. hope we're selling embedding we our more is would the motors, On more so that I covered is that. becoming say market That's that own would most motors fragmented, motors. standalone also in And

Dan Levy

very a there. Thank know lot It's it. you, helpful. I there's appreciate I

Operator

you. Thank

Bank of open. your Next line Rosner line question comes of is the from Emmanuel Deutsche

Emmanuel Rosner

-- think that and least additional Thank over-markets helpful. like, outlook. the what which growth next year growth elements market is of far. then of maybe, guess, coming year's would LVP more heard us a expecting your modest I question would thinking? the extent for first, that you out mentioned a what provide that of provided of quite LVP some color spoken first of And be and early side, still automakers than have I focusing growth some this probably bit think My top-line assessing you you a modest are outlook growth? the from little the the XXXX, so is that I saw bit on very more gross growth much. around you you gross then to Could really Maybe the the around conservative what even at this of cause IHS we've for some on or the

Kevin Nowlan

Yes.

So, evidenced $XXX fact things our days we're obviously on environment, a revenue million we got volatile in of still QX still still range outlook very for next couple early operating by the year, that look, as and a the on revenue outlook.

gives indication volume -- to the we as back the solution out an And you sit a so see and challenges XXXX, look that into environment. market volatility semiconductor the today, where as in volumes rapid a And don't snap to coming. from we in just sudden we

we're chain to to So, a more That's little are there's production. struggling year Which to is right why disruptions our recovery. when near-term expect we to continuing into some going early be today, year-over-year in the might to challenging say, we project what But than expectation that guiding suggesting, different of But chain be next a some a growth sitting impact of production from I'd bit is supply we that you're looks here still like November well given an much don't QX the perspective. sit of project where trying XXXX. who terms probably modest we're the pretty necessarily now. with others end in see you in disruptions. rapid supply translates

terms your the of starts it much outgrowth a how and over you benefit In or pull-forward would've XXXX years. that effectively outgrowth, couple been with of expected a what the might was in of otherwise have

in we middle We're and But things in that of in grow. to the the mid-single-digit that expect really suggests this this in years to year-over-year the assessment obviously We're market new with headwind base -- year's our we which the number environment by otherwise in happy a been of in the based process of now. for So, long-range that the from or the outgrew much is least of volatile fact how outgrowth this that grow That's half next for outgrow understanding outgrowth guidance XX% we to Company. XXXX. as versus the we had normally that some planning may at knowing would've a of it, a market middle or of we're not pull normal in XXXX. forward but range, that expect right it our expected on we us that last

question still So would wouldn't our full-year into our middle but and be It just mean, a guide and we've that tells a backlog in really what And it's you be that next to where in see been of the full-year strength this just of much from the have XXXX. our pull can I able accelerated forward the year, guide, you a in that how in is of year. billion thing. that a half it assessment, been a might accomplish bad this [Indiscernible] year. of

Emmanuel Rosner

through be very declining going on you fast plan impact EV, how in scale think then about as be that side, have business obviously Understood. combustion end initially average next may for broadly question, And revenues the of do some while is then business, either priority or strategic ICE the declining, from of typically can engine which you a profitable of to at the potential time that. profitability to on least would of is second And obviously essentially dispose at vehicle implication provide around organically or year, over margin, and And framework margins then these necessarily electric managing it the the disposal? margin? below your revenue a more gross doesn't by like how

Kevin Nowlan

just that profile I'd at might average probably average, margins. of depends. framework boxes, some even we can or have strong but leadership or the margins, strong of product to might is be we we it for space? long-term or that we're disposition. candidates average think that when prospects the for in we average we we not. same product products a At growth profile expect fits are below would leadership, what longer prospects? or have margin have are a say solid have the we Company doesn't Company a would margin the that if that product margin for So, consider do don't we above the a candidate businesses disposition. some Do for looking three medium or you businesses have product the have profile, say, look term, tick that and products might have They have BorgWarner undoubtedly So, below Remember don't time, Do business disposition, that actually at that would more margin business have the one profile? and with the a or growth

included thought, be And the that over the to contemplated would our portfolio. growth impact also have on we is in our we margin about already contemplates talk contemplates of mind P&L that term, The you range when the in dispositions. go-forward impact one be thing already strategy. we And EV It's in our the businesses portfolio. in it the that today. keep to results our in the revenue types at and about because growing in in now a $XXX million the million still $XXX longer R&D right in of P&L Investor on we our basis there longer-term that EV our only thought Day million margin investing related of XXXX So, P&L. have disposition we're And when $XXX guide, over we in the talked we would double-digit to

going tailwind as because get incremental contribution So a forward the we grow coming years. as look the more R&D business that we we that's to that's to continue out only start than offsetting margin over

today margin feel very and that at starting We're good You that comes and the can't negative growing a of about. businesses, P&L. we where it's a and contribution incremental business business the to I'm business. the margin well, we are those margin margin look into negative say, growing profiles And revenue from on generate the

Emmanuel Rosner

you. Thank Okay, that's very helpful.

Operator

you. Thank

from Next Junk Baird. Luke of of line the comes question

open. Your line is

Luke Junk

morning. Good for questions. Thanks taking

hybrid this if had edge First just or that trying XXX award provide all be business, wondering the there's can there's morning? gotten impact here North and EV color one and the to to just of question was specifically, both is, if described competitive volt additional of we've any this breadth awards high-voltage that'd XXX-volt and and if through element previous America whether question, lens And this a you your inverter on a I includes the specific as program.

Frederic B. Lissalde

tell you it's to all love it EV. The I'd give Look, I you is thing I'd can't. that detail only more

Luke Junk

EV. All

there since that. you've momentum the targets not of Thanks. Any going great the Obviously, to a now is that been combined the outlined the Follow-up up rewards Company. the to only we're wondering will from potential sustain XX-month activity other thoughts front but here. end to to originally extent got year served months only award good what you but XXXX had high-level question, to Okay. Great. take it's EVs, an deal. In about well. already, be as for I on Fred, for words, you closed EV pick XX the window just would for there

Frederic B. Lissalde

standpoint, Very an of past, our happy standpoint, we the From project mentioned underlying sales few was and pipeline inorganic that we years XX%, go. with billion, an at X/X we we AKASOL, organic inorganic represents that. $X.X to about have happy Good, charging the few, target pipeline. forward, $X.X a are billion, about as very are have. in and the From healthy we

We which are course, is not we're out happening. AKASOL And of integration, the engaged totally with preparing some now focused is on targets. squeeze process ours right until the

for track are disposition We on overall.

We are happy back momentum to track very presented see in on to versus you we organically inorganically. March, what and that both and

Operator

you. Thank

Next Spak from question the of Joseph RBC. line comes

open. is line Your

Joseph Spak

go I Good over comments back of market. you. want the on Kevin, to Thank growth made to some morning.

over -- were how to year mix-related, it more higher that seem tended You much a Because but forward, number. And to a is saying year made right? pull of probably dollar be would content. unit you're value comparing have to mark units growth this that part dollar better this the keep the me

add -- comps. much you to if that if you of have and was curious of get mix-related estimate could moving an So I'm how I tough the just 'XX, then

target on mid-single-digit seems the it to trying laid back margins or I are versus that the that out the year your really of think for mean dependent volume below some going understand is here. on people headwinds what path you've to conversion does next -- be because to potentially

Kevin Nowlan

impact we're We're XX% of versus of fair the average, and undoubtedly like of a this that things. of mix assessing it's growth below the It's in -- delivered growth absolutely potentially piece market think And delivering customer, I on over it of we process now. in look do mix a the absolutely expecting what if that above that's over where XX%. those right we're a at question XXXX think combination assessing again. and of some today, we market sit Are where we a back that's to potentially is equation in the on some that don't you first just think And that's the product, the over slightly be I growth had comment my average QX terms looks the So we XX% or what year-over-year is basis. isolation quarter to growth, of mix.

matter before? we there rates headwind question Or are So Or outgrowth any years? of, really backlog relative based middle strong the back projected In delivered that the on, have delivered that to that we growth last this of we've in of assessment the it's now. we right that is year. over a a few to normal

Joseph Spak

leveraging announcements picture that it and And see does and are of BEV. the still XX% And as the up, I this little number a -- pace ICE you change is is 'XX. to out faster clearly this Fred in you change was is maybe BEV decelerating originally just penetration mix to really BEV in like seems of curious then are traction But faster? only does increasing bit moving good helping in meaningfully mix the guess bigger But the 'XX, think because billion it obviously I laid the I'm which accelerates of that like forecasts BEV a that question relative is $X.X ICE towards don't are opportunity. is,

Frederic B. Lissalde

accurate. think that assumptions XXXX, in think I still we our Joe, are

in light XX% remember, back Investor our about of Day, market vehicle in March, in If talked XXXX. in BEV you

side. and was we are of north we And actually, XX%, what going pace thought north But Remember, be move target XX% you I XXXX XXXX in be of is back and so might might might think of low The a part think March. of pounds, our the right. The to happy we it's on of the market I XX% might very XXXX not thousands are the meaningfully. accelerating pace for BEV. volumes than be don't talking right, in be big I'm BEV. volume higher it. is significant. too. is sourcing volume several booking, what about are of hundreds acceleration is in here, the they the And of to BEV low requests of accelerating here We're be

Joseph Spak

that. for you Thank

Operator

you. Thank

Adam Research. Cleaveland of of line the from comes question Next Uhlman

open. is line Your

Adam Uhlman

go with other for for additional of you incurred if the that next morning. could margin do that if commodities, recoveries combined be an commercial with want if could and wondering to Hey, to you I'm might could meaningful, guys, year offset good back of us commentary they're I could and you non-material commodities in the a to expect stay much How headwind you to XXXX today. expect share where see if of us wonder outside that costs. then bunch headwinds. I frame you've and commodity the potential at

Kevin Nowlan

our terms guidance a year. for In mentioned, million of $XX $XX year to of about the million million full to embedded headwind, commodity headwind this QX million that. we're $XX as got supposed of net the to up in be commodity And I effectively remember $XX

to the accelerate in back So bit of started experienced we've and $XX has started the QX it in little opposed QX, to in front of half the $XX million, QX year. see to bulk in half QX, year million. but In the million $XX commodity in the We really been to the headwind QX, it and as of QX.

it's using you are that seen on if I we're and based so stand be QX. say, the And a it this to end but types can the at year-over-year you headwind QX those as levels, look actually those where That's at at point, commodities math would we of remained do assume remains given up. where and that assumptions we that planning what

in costs, impact guide, embedded terms the in In TBD, our P&L because on are the the us. of today those terms of other of

moment biggest at on commodity look impact really the seeing we headwind year. at this financials the think impact I the though, the is our we're what when is

Adam Uhlman

And on call-offs, Thanks. wondering of far here in perhaps the fourth you're lastly, any near-term and so it. customer quarter I'm question. in of a terms geographies color Got seeing then what that.

revenue a given fourth expected off maybe range of anything could wide Just quarter you little started the than share guidance. previously or wondering if rockier there. the it I'm

Frederic B. Lissalde

change so customers stuck the now. tough world me are path. day that close and a a another. ready is where guidance year. schedules still to key, but customers that's in the to It It's for happen from right regions Staying regionally happens all can for I is a no pretty think detail. place, and volatile It's [Indiscernible] don't surprise one the environment would our Volatility remainder to with it in is of to the one do why wide in be question very wise is wide ship, our answer and

Operator

Thank you.

and for that one David time Kelley final have We Jefferies. comes from question question of

Your is line open.

David Kelley

follow your remind morning have team. comments timing in. headwind last about squeezing opportunity Maybe the would of for year. us XXXX? commodity you just on XX% to good you and the me but in as thinking I we capacity first on rate question, up be there Kevin, believe Hey, typically pass-through about any that start Could helpful. half color next purchases, Thanks

Kevin Nowlan

about we've net or relates the net a we we mechanisms, typical fully the XX% that couple million what steel, exposed things When have gross A that is note about the the this roughly. guidance on $XX commodity are thus of commodity talk of blend is which to, to about of in million, at far year, at pass copper, - we double that things executing it we've the around basis. means and headwinds all XX% on Our $XX contractually look about, level the we're pass-through, you basis contractual nickel, when aluminum, pass-through most roughly a as blended to that. throughs headwind that been talked disclosed impact so, those our to

contemplates million already it. so $XX And $XX the recoveries million in to

pretty to year, So lag benefit from already I'd that's if you the there get say some in XX%, a that close translates today. into of think maybe we're little about you how next but

not just uncommon get The you second sustained to thing is a customers note seeing beyond when the of conversations environments having there, degree industry such across So, about pass-through see we're into more what I mechanism. do would to suppliers contractual it's the high like with inflationary

additional that with and than at that customer the we're and the what inflationary long is really XX% piece we'll heading what next whether experiencing others the last see and So base into year. have how to-date level warrants conversations the contractual or environment we

David Kelley

about maybe then one, commercial about, could vehicle contribution great. one maybe on traction, quarter, got color from Okay, any outgrowth And be you. vehicle your kind the the of talk you if commercial exposure you're would thinking last and in fourth-quarter your it. how Thank

Kevin Nowlan

total still caught Our around teens XX% commercial is of running low vehicle that in our portfolio.

next move needle really the the are The that where to at do point, So not year. is be commercial on think going this as focused out, an things that and a year, material about Obviously, balance the it's as industrial changes AKASOL look of be you would we acquisition space. on we whether anything front. we vehicle this

the that low-teens a they range of coming in that a continuing a years, we'll up And so, as in operate mix of in from terms ramp we're over terms to percentage mix. But get perspective. tailwind

David Kelley

Great. Thank you.

Frederic B. Lissalde

you thank all for great your today. So, with that, questions I'd like to

you If go reach any of ahead can the feel to Jay, out you have follow-ups, the and free rest With and to call. me the close team. that

Operator

BorgWarner Quarter Results Third the that And does XXXX Call. Conference Thank you. conclude

disconnect. now may You